Pension tax relief must be protected – Curtis Banks

The government has been encouraged to protect pension tax relief from changes in its upcoming Budget by Curtis Banks.

The issue has been hotly debated in recent years, with report published by the Institute of Economic Affairs in the run up to last year’s aborted Budget having proposed scrapping the tax-free cash available from pensions in order to fund the ditching of inheritance tax.

But Curtis Banks pointed out that, during the 2017-18 tax year, the cost of pension tax relief to HMRC accounted for less than 10 per cent of the £416.8bn expense of total tax relief, coming in at £37.8bn.

HMRC claimed in its annual report that, due to demographics and increased amounts of saving now, the future net cost of pension tax relief is expected to be even lower.

Curtis Banks group communications director, Greg Kingston, said: “Pension tax relief is a vital part of the pension system and must be protected. It encourages workers to save more for their retirement and is an investment in lower state intervention and support later in their future retirement.”

The Sipp operator said that while “some reform” is required with regards to the pension tax taper, MPAA and lifetime allowance, pension tax relief drives desired outcomes for workers and encourages saving for retirement.

2hWealthcare chartered financial planner, David Allan, said: “We are of the belief that pension tax relief encourages desired outcomes for our clients. The scrapping of the pension tax relief would have a hugely negative impact on workers savings and in our view should not take place.”

Curtis Banks’ calls for protection came as Hargreaves Lansdown urged the government to conduct a full review of the UK’s pension tax rules and proposed a three-tier alternative system which would see tax relief on employee contributions fully abolished.

The proposals included hiking the minimum employer auto-enrolment contributions from 3 to 5 per cent, which Hargreaves Lansdown said would negate the need for tax relief.

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